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This report involved a critical strategic analysis with respect to the strategy as carried out by Woolworths in achieving higher level of growth and development in its operations. The analysis indicated that the strategy of Woolworths has been to achieve higher level of growth in its operations, and this is positively sought by the company by way of satisfying its customers and also its employees positively. The analysis of the external environment affecting the Australian retail and Woolworths is carried out and based on the analysis, it is analysed that the external environment in the form of political and environmental conditions are affecting the performance of Woolworths directly. Apart from this, it is also assessed that the competitive condition is also extremely higher and these aspects are necessitating significant level of change and development in its strategy. The analysis of the internal environment conditions indicated that it is highly supportive in the context of Woolworths as the company has strong database of skilled employees, highly efficient infrastructure and good sourcing capabilities etc. All these aspects positively support the growth strategy of the firm in a positive way. The analysis leads to recommendations that Woolworths should focus towards higher overall innovation in its practices and also look towards further enhancement of the skills and abilities of its employees through considering the additional requirements for training and development.
This report is mainly focused towards performing a critical strategic analysis of an organisation, and such organisation as selected is mainly Woolworths. Woolworths is an Australia supermarket retailer that has been one of the leading players in the industry. The company has achieved significant level of development and growth across the Australian retail and there are various such factors that have contributed towards its higher such growth. The major role has been played by the strategy of the organisation, and as a result, this strategic analysis report is likely to perform a critical analysis of such strategy of Woolworths in a positive manner. The strategic analysis therefore focuses towards evaluating the current business strategy of Woolworths so that further recommendations can be provided with regard to achieving improvement over its current strategy (Carysforth and Neild, 2000). There are certain important strategic tools that are considered in analysing the company’s current level of strategic position in the industry including an analysis of the internal and external environment conditions of the company. The strategic analysis of Woolworths is being carried out by way of applying important strategic tools such as PESTEL, Value chain analysis etc.
Strategic Analysis of Woolworths
An analysis of the role as played by Woolworths in the Australian retail industry indicates that the company has achieved significant level of dominant position in the Australian retail industry and the major reason leading to such highly efficient position of the company is mainly the strategies as pursued by the company. As for instance, the company has growth strategies in operations and as per its growth plans, the important strategic priorities of the company include extending its leadership in all its market segments, utilising its portfolio is maximising the shareholder value, maintaining a track record of growing business and looking for higher overall future growth of its business. The strategy of the company includes satisfying its employees and customers to the maximum possible extent and this is ensured through listening, acting and learning process so that it becomes possible to innovate and ultimately in achieving better customer satisfaction. The strategy towards employees indicates that the company aims at providing sound working environment conditions and good pay for the work as performed by its employees (Woolworths Strategy and Objectives, 2014).
External Analysis of Woolworths
This section of analysis is now focussed towards performing a critical analysis of the external environment conditions of Woolworths, and this is performed through the consideration of large number of tools as indicated below:
Macro Environmental Factors Affecting the Industry: The analysis of the macro environmental factors impact the industry conditions can be better analysed by way of applying important strategic analytical tools such as Porter five forces and PESTEL analysis as follows:
Porter Five Forces: The Porter five forces analytical tool assesses the current position of the entire industry and the ways in which different factors affect its performance conditions. The analysis of the Australian retail industry through the application of this analytical tool is performed as follows:
- Bargaining Power of Buyers: The bargaining power of buyers in respect to Australian retail industry is significantly higher because there is large number of supermarkets and retail stores that provides basic items of necessity to consumers. Because consumers have wider options to select from, their bargaining power has been significantly higher.
- Bargaining Power of Suppliers: An analysis of the Australian retail industry indicates that it is highly concentrated and there are certain big players that have concentrated majority of the market share. This increases the bargaining power of suppliers to a certain level and as such, it may be regarded that the bargaining power of supplier has been moderate.
- Threats of New Entry: In terms of threats of new entry is concerned, it is regarded as lower because larger firms have made it extremely difficult for the new players to enter into the industry conditions and this therefore reduces the overall threat of new entry into the industry conditions (Andersen and Schrøder, 2010).
- Rivalry among Existing Firms: The threat of rivalry as assessed within the Australian retail indicates that it is significantly higher mainly because of the fact that there are few major competitors such as Woolworths, Wesfarmers, Coles Supermarket, Asda etc that are competing against each other for larger market share.
- Threat of Substitute: The retail daily consumable products are highly essential and their consumption on daily basis is highly important. There are no other alternatives available to them and as such, the threat of substitute in lower. Consumers have to consume the retail products as they have no other choice.
PESTEL Analysis: This is another important analytical tool in assessing the external industry environment conditions affecting an industry performance. The application of PESTEL analytical tool in assessing the retail industry performance is performed as follows:
- Political: The political condition affects the retail industry in Australia and also the performance of Woolworths to a greater level. As for instance, the Federal Government in Australia has recently launched a competition policy which prevents major independent players such as Woolworths and Coles in eliminating competition. The increasing market dominance of these major retailers has resulted into small retailers struggling to perform in the industry (Hoy, 2014).
- Economic: A decline in the economic market conditions across Australia has affected the performance of Woolworths significantly, as there has been the decline in the economic activity in the markets of Australia and New Zealand and Woolworths. Apart from the decline, the economic indicators such as fluctuations in the currency exchange rates and weakening of Australian dollar have adversely affected the Woolworths’ international retail operations (Woolworths Annual Report, 2013)
- Social: The social factor is also affecting the Australian retail industry in the sense that the organisations operating across Australia have to achieve higher societal and community development because the recent social trends within customers implies that they prefers highly socially responsible organisation and by undertaking societal initiatives, the retailers such as Woolworths create significant impact over its customers.
- Technological: The role of technological factor affecting the retail industry and Woolworths in particular is significant as this can be identified from the fact that Woolworths has considered the application of green refrigeration technology so that the perishable products can be stored for longer duration of time period.
- Environmental: The environmental factor is also affecting the performance of Woolworths and the entire retail industry in particular across Australia. An analysis implies that Woolworths in particular is affected by the environmental factors in the sense that the Woolworths petrol and winemaking businesses are posing adverse threats on the performance of environment conditions and this has therefore affected the profitability performance in these business areas of the company.
- Legal: The legal factor in the form of carbon tax as implemented across Australia has also affected the retail industry and Woolworths in particular. An assessment of Woolworths indicate that the regulation by Australian Competition and Consumer Commission and New Zealand Commerce Commission have affected the operations of the company across the economy. Further, the need to operate in a fair way has also affected the performance of Woolworths, as it is required to adapt fair policy in performing its business operations (Wetherly and Otter, 2014).
The analysis of the external market environment conditions in respect to Australian retail industry and in particular, with regard to Woolworths has resulted into the identification that the strategy of Woolworths and its operations is highly affected by such external industry condition. They in turn have affected the strategy of Woolworths in particular in performing successful operations of its business activities. The external environment conditions have affected the need to perform innovation in order to satisfy the ever changing social trends within customers (Woolworths to create 10,000 new jobs and increase food sales by $2.5bn, 2013).
Internal Analysis: This section of analysis is now focused towards performing an internal analysis of Woolworths with a view to analyse the effectiveness of the strategies as pursued by the company. The internal analysis of the company is accompanied by the application of certain strategic tools in the form of SWOT analysis, value chain analysis etc. The application of these tools in analysing the strategic performance of the company is performed as follows:
SWOT Analysis: The SWOT analysis stands for strengths, weakness, opportunities and threats and the application of this tool in the context of Woolworths is performed as follows:
- Strengths: The strength of Woolworth is that it is the market leader in the Australian retail industry, and its leadership position further enhances the ability of the company in exploiting the market potential through its strong resources in the form of technological resources, human resources and good presence across the industry. The wise application of its resources is partially affected by external environment conditions which necessitate minimising its carbon footprint and findings cost efficient ways of reducing packaging and achieving zero food waste by 2015 (Woolworths Corporate Social Responsibility, 2012).
- Weakness: Apart from strengths, the weakness to Woolworths in its growth strategy is mainly the impact by the external environment conditions which affects it ability in dominating the Australian retail market. As for instance, the Australian government has restricted the move of Woolworths in keeping higher prices for its products in collaboration with Coles which indicates the major weakness to the company in supporting its higher growth levels (Cole, 2003).
- Opportunities: The retail industry across Australia shows good growth potential and the factors such as computerisation, advances in supply chains, and consumer lifestyle changes have all affected the abilities of retailers and provided good opportunities to grow. Woolworths is also positively looking towards embracing this option by way of adapting the strategy of multi-option retailing in order to cope up with the changing needs of its customers (Krafft and Mantrala, 2009).
- Threats: The threats to the Australian retail are mainly from the higher competition level in the industry with Woolworths primarily competing with the Coles Supermarket. Apart from this, the government intervention is another major significant factor affecting the growth of Woolworths in particular within the Australian retail (Samson and Daft, 2012).
Value Chain Analysis: This is another important strategic tool in analysing the internal performance conditions of an organisation, as the value chain indicates about the primary and support activities that allows an organisation in supporting its operations. The primary activities mainly imply the inbound logistics, operations, outbound logistics and sales and service to customers. An analysis of the case of Woolworths indicate that the sourcing strategy as adopted by the company is aimed at achieving sustainable performance conditions whereby the company adapts local food sourcing strategy in order to ensure development and growth of local firms. This strategy of locally sourcing food is aimed at supporting the local producers and its purchasing process also indicates that it supports sustainable development. The products as sources are being processed and they are sold under the Woolworths brand across the shelves of the company in its supermarkets (Woolworths Local Food Sourcing Strategy, 2014).
These primary activities are supported by a large range of support activities of the company in terms of highly skilled human resources across the country, strong IT infrastructure condition and also the supporting supply chain systems as carried out across the organisation. The analysis of the people at Woolworths indicates that the people are at the heart of its business, and there has been specific culture and strategy that has been followed at Woolworths in supporting its customers. The company has a long term commitment to building internal capability and as a part of its commitment, it employs diverse people within its employee database. There has also been the provision of training for its employees that has been ensured by the company which contributes positively in accomplishing its strategic goals within the industry (Culture and Strategy of Woolworths, 2014). Apart from this, the infrastructure at Woolworths has been highly excellent and this is assessed from the fact that the company has strong presence throughout Australia and New Zealand and its built up large supermarket stores have been significant from the point of view of allowing the company in efficient serving its customers (Vedamani, 2003).
Conclusion and Recommendations
A critical strategic analysis of Woolworths has been carried out with a view to assess the important strategies that have been undertaken by the company and the performance of entire analysis has indicated that Woolworths is focused specifically towards attaining higher level of growth in its operation. This growth is mainly supported by its strong commitment towards its customers and the employees. The analysis of the external environment conditions as faced by the Australian retail industry indicates that the factors such as political condition in the form of governmental influences, changing social patterns and trends within customer and also the adverse economic conditions including highly competitive business environment conditions have all affected the strategy and growth of Woolworths in a negative manner. The analysis also indicated that the internal environment conditions have also impacted the growth potential of Woolworths and based on the overall strategies, the following recommendations are considered essential:
- It is recommended that Woolworths should aim at framing its strategy consistent with that of political conditions as prevalent across the country. It should aim at adapting the strategy of fair price policy to its customers (Durie, 2012).
- It is also recommended to Woolworths that it should aim at performing continuous innovation and this particular factor should be included as a key part of its strategy. This is mainly because the consumer social trends and preferences are showing dynamism which can be efficiently addressed through considering this strategy of higher growth levels (Niemeier, Zocchi and Catena, 2013).
- The recommendations to Woolworths strategy also implies that it should look towards further enhancing its support from skilled employees by way of additional training and development mechanism to its customers (Craig and Campbell, 2012).